Steady Streams

813-274-7620

[email protected]

We consider Aqua America a core long-term holding and reiterate our Outperform rating. WTR faces a difficult earnings comparison next year due to the +$0.09 benefit from bonus depreciation in 2011.

Excluding this effect, our estimate assumes earnings growth at the top of the company's 7-10% long-term earnings range, driven by an increased earnings contribution from the company's portfolio swap transactions, normal weather, and increased rates in Pennsylvania in 2H12.

American Water Works' 2012 guidance range is in line with Street expectations; we maintain our Outperform rating. The company's business plan remains largely unchanged with earnings growth likely driven by: investment in infrastructure, efforts to improve operating margins, reduction of regulatory lag through expanding regulatory mechanisms, execution of portfolio rationalizations, and an improved contribution from the non-regulated business.

AWK reiterated its long-term EPS growth goal of 7-10%. With above-average earnings outlook and the stock trading at a discount to peers, we maintain our Outperform rating.

We maintain our 2012 estimate of $1.92 per share until we have a chance to review the company's 10K filing to get an update on water usage and growth trends. Consensus stands at $1.91 per share. We remain at the low and of management's 7-10% long-term earnings range, which may prove conservative.

Credit Suisse

212-538-8422

[email protected]

American Water Works (AWK) issued 2012 EPS guidance of $1.90-$2.00 versus our $1.91 and Street's $1.94 and expects in line 2011 EPS of ~$1.79 versus our $1.77 and Street's $1.78. The dividend plan will be revisited in June, although management seemed to indicate that a significant dividend hike is not on the horizon, and the likely response is a measured increase in line with earnings growth.